Auto sales in the United States and Canada could fall by 1.8 million vehicles this year as new tariffs on imported cars take effect, according to a forecast by Detroit-area automotive advisory firm Telemetry.

The estimate, provided to Reuters, projected that if the tariffs remain in place through 2035, sales of light-duty vehicles in the region would be 7 million units lower than under a scenario with strong economic growth and no trade restrictions. Light-duty vehicle sales in the United States and Canada totaled 24.6 million units under the no-tariff scenario.

President Donald Trump's administration imposed a 25% import tariff on automotive vehicles starting April 3. The tariff applies to vehicles imported from Mexico and Canada, though automakers that meet the U.S.-Mexico-Canada Agreement's requirements can deduct the value of U.S.-sourced components. The administration also introduced reciprocal tariffs on other countries, but Canada and Mexico were largely exempted from those.

The tariffs have forced automakers to adjust operations. General Motors (GM, Financials) ramped up truck production at a plant in Indiana, while Stellantis (STLA, Financials) temporarily shut down facilities in Mexico and Canada, disrupting production at five associated U.S. locations.

Ford Motor (F, Financials) and Stellantis raised consumer incentives to help offset price increases from the tariffs. Analysts expect the duties to raise vehicle prices by several thousand dollars. Telemetry Vice President Sam Abuelsamid said the market is already strained by affordability challenges, with average vehicle prices approaching $50,000 and auto loan rates climbing since the COVID-19 pandemic.

“With sales going down, you're going to have layoffs,” Abuelsamid said. “And even to the degree that some production shifts to the U.S., it's not going to be enough to offset the lost employment from higher costs and lower sales.”

While electric vehicle sales have cooled recently, Telemetry forecasts battery electric vehicles to become the leading powertrain globally within a decade, with 40.5 million units sold annually. In a favorable scenario with no trade conflicts, electric vehicle sales in the United States and Canada could reach 8.8 million units.